The 2016 autumn budget has just been announced, and the good news is that the Cycle to Work scheme remains unchanged. For UK cyclists, this is a great way to save up to 42 percent off the cost of a bike. Let's have a look at how it works and whether you're eligible.
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In essence, your employer buys a bike for you to ride to work, you ‘hire’ it through salary sacrifice (which is where you save, by not paying tax and National Insurance on the monthly fees) and at the end of the ‘hire’ period you buy the bike from your employer. In other words, your salary sacrifice is made from your gross salary, not your net salary.
Hundreds of thousands of people have already bought a bike on the scheme, which was introduced as a tax exemption in 1999 by the government to ‘promote healthier journeys to work and reduce environmental pollution’.
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Because it was set up to promote work journeys rather than cycling in general, your employer technically remains the owner of the bike once you finish the hire period. Everyone knows that in practice the employee is ‘buying’ the bike, but that isn’t legally the case until the salary sacrifice ends and the employer ‘sells’ the now heavily depreciated equipment to the employee.
In the past, few employers have bothered with the final sale transaction because it was a hassle, so many employees didn’t have to make a final payment. However, that changed a few years ago with HMRC clarifying that bikes needed to be sold at Fair Market Value so as to avoid the scheme being a tax loophole.
Third-party providers, such as Cyclescheme, now usually offer a variety of options: pay a small refundable deposit to re-hire the bike for three more years (after which the bike is yours for free), pay the fair market value (normally about 18 percent or 25 percent of the certificate value of the bike), or return the bike.
How the Cycle to Work scheme works
Do I have to ride My Cycle to Work bike to the office every day?
Why use the Cycle to Work scheme?
- You'll live longer – says the NHS
- It saves the entire CO2 output of a city the size of Hereford each year
- Cycling to work can help you burn between 75 and 670 calories a journey, obviously depending on how far your journey is (according to http://ift.tt/KduQBD)
- It'll make you feel happier, getting you outside in the sunshine boosting your levels of vitamin D
- You'll save money on commuting while also easing congestion
- And we've got at least another 30 reasons to take up cycling
You can read more at BikeRadar.com
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